【正文】 h large banks in London are willing to lend money among themselves. This rate, which is quoted on dollar denominated loans, has bee the premier shortterm interest rate quoted in the European money market, and it serves as a reference rate for a wide range of transactions. For example, a corporation might borrow at a floating rate equal to LIBOR plus 2%.ors customers. Funds in the bank39。term repoalso called “repos” or “RPs,” as a form of shortterm, usually overnight, borrowing. The dealer sells government securities to an investor on an overnight basis, with an agreement to buy back those securities the next day at a slightly higher price. The increase in the price is the overnight interest. The dealer thus takes out a 1day loan from the investor, and the securities serve as collateral. acceptances are considered very safe assets because traders can substitute the bank39。banker39。While most mercial paper is issued by nonfinancial firms, in recent years there was a sharp increase inCommercial paper is considered to be a fairly safe asset, because a firm39。Commercial paper maturities range up to 270 days。mercial unsecured debt issued by large corporations.Certificates of DepositAs discount from its maturity or face value is “annualized” based on a 360day year, and then reported as a percentage of face value. For example, for the highlighted bill maturing on November 19, days to maturity are 36 and the yield under the column labeled “Asked” is given as %. This means that a dealer was willing to sell the bill at a discount from par value of % (36/360) = .0043%. So a bill with $10,000 par value could be purchased for $10,000 (1 ? .000043) = $9,. Similarly, on the basis of the bid yield of %, a dealer would be willing toFigure October 15, 2009.yieldis the difference in these prices, which is the dealer39。bid priceThe price at which a dealer is willing to purchase a security.Figure Tbills are issued with initial maturities of 4, 13, 26, or 52 weeks. Individuals can purchase Tbills directly, at auction, or on the secondary market from a government securities dealer. Tbills are highly liquid。s maturity, the holder receives from the government a payment equal to the face value of the bill. The difference between the purchase price and ultimate maturity value constitutes the investor39。or justmoney marketsIncludes shortterm, highly liquid, and relatively lowrisk debt instruments.Each broad asset class contains many specific security types, and the many variations on a theme can be overwhelming. Our goal in this chapter is to introduce you to the important features of broad classes of securities. Toward this end, we organize our tour of financial instruments according to asset class.Within each class the investor then selects specific assets from a more detailed menu. This is calledIYOU LEARNED INasset allocation.Financial markets are traditionally segmented intocash equivalents,(Tbills, or just bills, for short) are the most marketable of all money market instruments. Tbills represent the simplest form of borrowing: The government raises money by selling bills to the public. Investors buy the bills at a discount from the stated maturity value. At the bill39。is the price you would have to pay to buy a Tbill from a securities dealer. Thes bid and asked price.that the bidThe Wall Street Journal Online,The first two yields inThis means that the bill39。bondequivalent yield.p. 30. Government Printing Office, 2009。 that is, they can be sold to another investor if the owner needs to cash in the certificate before its maturity date. Shortterm CDs are highly marketable, although the market significantly thins out for maturities of 3 months or more. CDs are treated as bank deposits by the Federal Deposit Insurance Corporation, so they are currently insured for up to $250,000 in the event of a bank Commercial PaperLarge, wellknown panies often issue their own shortterm unsecured debt notes rather than borrow directly from banks. These notes are called AcceptancesAs customer to pay a sum of money at a future date, typically within 6 months. At this stage, it is similar to a postdated check. When the bank endorses the order for payment as “accepted,” it assumes responsibility for ultimate payment to the holder of the acceptance. At this point, the acceptance may be traded in secondary markets like any other claim on the bank. Bankers39。repurchase agreements,Shortterm, often overnight, sales of government securities with an agreement to repurchase the securities at a slightly higher price. A reverse repo is a purchase with an agreement to resell at a specified price on a future date.Ais the mirror image of a repo. Here, the dealer finds an investor holding government securities and buys them, agreeing to sell them back at a specified higher price on a future date.p. 32Federal FundsJust as most of us maintain deposits at banks, banks maintain deposits of their own at a Federal Reserve bank. Each member bank of the Federal Reserve System, or “the Fed,” is required to maintain a minimum balance in a reserve account with the Fed. The required balance depends on the total deposits of the bank39。s reserve account.London Interbank Offered Rate (LIBOR)Rate that most creditworthy banks charge one another for large loans of Eurodollars in the London market.LIBOR interest rates may be tied to currencies other than the . dollar. For example, LIBOR rates are widely quoted for transactions denominated in British pounds, yen, euros, and so on. There is also a similar rate called EURIBOR (European Interbank Offered Rate) at which banks in the euro zone are willing to lend euros among themselves.Yields on Money Market InstrumentsAlthough most money market securities are of low risk, they are not riskfree. The securities of the money market promise yields greater than those on defaultfree Tbills, at least in part because of greater rel